TMI Blog2023 (3) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... on similar accounting standard, without specifying the criteria prescribed under section 145(3) - AO without giving his finding that the assessee was really engaged or indulging in providing entry, or the transaction shown by the assessee are circular transaction, compared the assessee with entry provider company and estimated commissions income. AO not even examined the bank statement of the assessee. No finding about the expenses claimed, if any, was given. The assessing officer estimated income on the purchases as well as on sales, which is unjustified. No infirmity or illegality in the order passed by the ld. CIT(A) which we affirm. In the result, all the grounds of appeal which is in the form of narrative, is dismissed. - ITA No. 411/Srt/2019 - - - Dated:- 13-3-2023 - SHRI PAWAN SINGH , JUDICIAL MEMBER AND DR. ARJUN LAL SAINI , ACCOUNTANT MEMBER For the Department : Shri Vinod Kumar ( Sr. DR ) For the Assessee : Shri Sapnesh Sheth , CA ORDER PER: PAWAN SINGH , JUDICIAL MEMBER : 1. This appeal by the Revenue is directed against the order of learned Commissioner of Income Tax (Appeals)-2, Surat (in short, the ld. CIT(A) dated 27/06/2019 for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring, importing and exporting of diamonds, filed its return of income for the A.Y. 2013-14 on 30/09/2013 declaring Nil income, after claiming current year loss of Rs. 1.80 crore. The case was selected for scrutiny. During the assessment, the Assessing Officer noted that the assessee has shown sundry creditors of Rs. 25.74 crores, details of which were compiled in para 4 of assessment order. In order to verify the creditors, the Assessing Officer deputed the Ward Inspector. The Inspector visited at the address of creditors provided by the assessee on 17/02/2016. The Inspector furnished his report on the same day. In the report, the Inspector reported that none of the creditors party are in existence on the address provided to him. He also reported that the said parties were never existed on such addresses, either in past or present. After receiving such report, the Assessing Officer asked to assessee to produce the books of account with complete details and supporting vouchers along with stock register and sales and purchase register. On perusal of such details, the Assessing Officer was of the view that no quality wise details of items sold or purchases is shown. The diamond is hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee cheque. All the necessary books of account are maintained and has been submitted before the Assessing Officer. The books of assessee is audited under Section 44AB of the Act, copy of such audit report is already furnished. The assessee also relied on various case laws. 5. The Assessing Officer not accepted the explanation furnished by assessee. The Assessing Officer held that business of the assessee is not genuine and merely existing on papers for providing entries to the parties. The Assessing Officer rejected the books of account under Section 145(3) and proceeded to make assessment under Section 144 of the Act. The Assessing Officer noted that the assessee has shown purchase of Rs. 101.14 crores and sales of Rs. 105.38 crores, thus the assessee has provided entry to the tune of Rs. 206.53 crores. The Assessing Officer estimated profit @ 1% on total turnover thereby made addition of Rs. 2.01 crores. 6. Aggrieved by the additions, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed its detailed written submissions as recorded in para 5 of order of ld. CIT(A). The assessee in its submission submitted that during the year under consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases of assessee is vouched and verifiable. The assessee has maintained quantitative details in respect of diamonds purchased and sold by it. There was no adverse comment from auditors that profit cannot be computed from the books of account maintained by assessee. There is no requirement of law to maintain quality details of each piece of diamond for computing the income. The income of assessee company can be very well computed on the basis of accounts already maintained by assessee. There was no defect in the method of accounting which requires the rejection of book results. Books of account cannot be rejected under Section 145(3) that only on the basis of fact that the assessee had not maintained the quality wise description of stock. To support such contentions, the assessee relied on various case laws as noted by the ld. CIT(A) on page No. 23 and 24 of the impugned order. On the observation of Assessing Officer in sales and purchase bills produced, there was no acknowledgement of delivery of items was done by him or staff. The assessee explained that books of account had also been audited under Section 44AD of the act which has already been furnished. No defect was fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from assessing officer. The assessing officer was directed to examine the contentions of the assessee and to file his remand report. The assessing officer furnished his remand report dated 15.05.2019. In the remand report dated 17.022016, the assessing officer reported that outstanding as on 31.03.2012 and 31.03.2013 were same in respect of the creditors, which points to the facts that no transaction might have been carried out by the assessee with these parties during this year unless equal amount of outstanding payment and fresh purchases have been made from these parties. The assessing officer also issued notice under section 133(6), which was replied by Suparsheva Gems Private Limited and Suyash Gems and also filed their sales register, ITR, bank statement on 12.02.2016. The contents of the remand report is recorded on page No. 33 of order of ld CIT(A). The assessee filed his rejoinder to the said remand report, contents of which is recorded on page No. 33 to 35. In the rejoinder the assessee repeated its submissions and submitted that when the assessing officer accepted the books of accounts of previous and subsequent years, the same cannot be rejected in the year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing, importing and exporting of diamonds. The assessee has shown purchases from six parties aggregating of Rs. 25.74 lacs. The Assessing Officer doubted the creditors and on the basis of report of Inspector that none of the creditors were in existence, proceeded to reject the books result by doubting the business activities and made addition of 1% of the total turnover of the year. The addition made by the Assessing officer is completely baseless and was not sustainable and was rightly deleted by ld CIT(A). The transaction of sundry creditors was of earlier years and not for the assessment year in question. In the immediately preceding assessment year, no such doubt was raised about the genuineness of business activities and the assessments were completed under Section 143(3) of the Act. The books of account were accepted in previous assessment years. There cannot be a case where the Assessing Officer accepted the books of account in previous and subsequent assessment years and rejected in current assessment year by taking a view that the assessee is not maintaining consistency in accounting principle. The assessee made purchases in A.Y. 2012-13, which has been accepted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore by taking view that business of the assessee is not genuine and existing on papers for providing entries to the parties. The Assessing Officer rejected the books of account under Section 145(3) and noted that the assessee has shown purchase of Rs. 101.14 crores and sales of Rs. 105.38 crores. The assessee has provided entry to the tune of Rs. 206.53 crores. The Assessing Officer estimated profit @ 1% on total turnover and added Rs. 2.01 crores. As noted above, before ld CIT(A) the assessee filed detailed written submissions. On the submission of the assessee, the ld CIT(A) called remand report form the assessing officer. The assessing officer filed his report dated 17.02.2017. The ld CIT(A) on considering the remand report of assessing officer held that conclusion drawn by assessing officer about the assessee that it is a paper company is not correct. The assessing officer has wrongly rejected of books of account, when assessing officer in his remand report has accepted about first three creditors, as there is no transaction with these three creditors during this year. Further no question about the genuineness is raised by the assessing officer about the purchases from these th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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